[Music]
I'm just testing the clicker
okay okay hi um can you hear me okay
okay I'm sasher I'm a researcher at Lido
um I just recently read the blur for the
talk and it's not at all what I
originally set out to do so I apologize
it's not as funny as I wanted it to be
and it's not as simple um so bear with
me what this talk is not
about this talk is not about making the
case for no issu and
change um this talk is about it you know
there are good reasons for that to do
with uh mainly
neutrality um and I think like a
pessimism towards attracting new solo
stat
but that's for another talk this is
really to try and find some sort of
consensus some sort of bridge between
what Casper andar um and Anders are
doing and how
um I guess a subset of lighter
contributors think about
things so what this talk is
about an attempt to find a symphasis as
consensus that all sides can put up
with it does take as axiomatic that most
EF researchers have already made their
mines up um on an issurance cut although
there are disagreements on the
details okay so what do we agree on
already I think we are all aligned that
issuance should concern itself with like
macro level risks to
ethereum um this is anders' framing if
you look at number two there are sort of
exist poal macro level risks and I think
that's within the scope of issuance to
try and anticipate and
fix um one you know one thing that I
think Casper and touched on is that the
Crux of this is having a viable social
layer that's uncorrupted by any staking
provider right that's ultimately what
matters to Credible
neutrality okay so where do we
disagree we
disagree on three things I think right
the first is what the purpose of
issuance should be and this is kind of
we maybe
disagree the second is our confidence in
the shape of the longrun supply curve
and this is you know probably um
disagree and the third is the relative
chances of macro level risks under
different issuance rates and I think
this on this is what we definitely
disagree on right this is the Crux of
it so I'm going to present kind of one
side thesis the other side antithesis
and try and come to some sort of
symphasis um so kind of the you know one
side of the argument goes not touching
issuance at this stage increases the
likelihood that an LST like Lio ends up
dominating e as the most liquid and
widely used currency within the
ecosystem this would make it much harder
for airm to recover if that lstd were to
turn malicious at some point in the
future much harder to Fork something out
that most users depend
on um this is kind of like you know well
summarized by Anders here uh you know a
Keyon for mvi is precisely because of
the fear that all e would be staked when
some Black Swan event takes
place and this is kind of sort of a
story uh mode in anders' Twitter which I
think does a good job of kind of
articulating uh that
event okay what's the counter what
what's kind of the anti is here um so
the other side here is that um cutting
issuance increases the likelihood The
decentralized Exchange dominates
staking this could have dire
consequences for aer's ability to remain
censorship resistance and hence E's
value a coinbase Tailwind is
increasingly likely given Trump's
election
win um there is now an increased
probability of staking
ETFs so why are we considering adding
fuel to the
fire but perhaps most importantly
even with less than 50% of each stake
the malicious coinbase could prove
impossible to socially
slash and to see this um small story
kind of inspired by Anders but kind of
the sort of the the other side consider
the following right
okay a significant isurance cut is
implemented um let's say in you know 6
months two years time um maybe even
sooner um with margin compressed and Eve
staking ETF given the green light Stak
centralizes pretty quickly within a few
years over 50% of validators are run by
coinbase um 2030 the Dems are back in
power the US government puts a
tremendous amount of pressure on
coinbase to refuse to process blocks
that contain privacy preserving
transactions in them or transactions
from a continuously updated government
Blacklist that could in you know include
human rights activists journalists uh
whoever whoever is kind of Public Enemy
Number One at the
time by this time Brian is no longer o
he stepped down to focus on Long levity
research he's kind of burnt out of all
the politicking uh his replacement is
not as OG or aligned and caves in in
order to appease both the government and
coinbase
shareholders um most of the FM crowd is
now on farcaster I don't know maybe they
already are already on for farcaster um
while farcaster has been you know great
for the ecosystem it strong ties to
coinbase make it especially difficult
for anti- coin based narratives to
spread across the social lay and that
kind of has to do with like how an
initial network is seeded right if you
look at um I'm not going to go into this
now but it does uh you know if there's
momentum of initial followers and uh in
that's kind of hard to undo later
on um okay major Basin farcast influence
argue that foring out coinbase at this
stage would be extremely unfair to
innocent users and you can think of sort
of I think Anar has mentioned teachers
with Pension funds Etc like you're not
going to just fol them out and and and
and stash their eath
um so this leads to some sort of Crisis
right so you have on one side if your
ois and researchers who are threatening
to leave the project if the censorship
doesn't stop and on the other hand um
you have these kind of uh you know
coinbase aligned people that that have a
lot of social influence that that say
this is kind of uh a really bad idea for
AUM so the AUM Community splits into two
camps a contentious for fork occurs and
circle surprise surprise sides with
coinbase so at this point you have two
sides in their own separate universes
with their own chains with no practical
way of coming back together um ethereum
a global permissionless platform created
in part to be a refuge from Nations and
geopolitics instead ends up cleaved in
half by a large corporation that is
ultimately accountable to its
shareholders and
government so coming back down to earth
like what what the hell is the point of
all this the point of this anti fuses
here is to show that it's too simplistic
a view um it's too simplistic to to sort
of view the macro level risk through the
lens of solely the amount of E tied up
in
staking um which is you know a lot of
the which is the foundation for a lot of
um the issurance
discussion um one of the main reasons
given for cutting issurance so as we see
there are complex social dynamics at
play here that are very different very
difficult to untangle right um this is
one hypothetical scenario but you can
dream up you know millions of them it's
it's like uh it's not difficult to
so double clicking on on the coinbase
risk um today it's I mean this these
stats are slightly out of date but it's
the largest theum node
operator um nearly 15% market share
could be over 15%
now um staking ETFs likely to happen
under Trump there's a good chance coin M
Will C on the market
here
um yeah there's you know us-based
custodians are more likely to be
whitelisted uh if you look at Bitcoin
out of 11 Bitcoin ETFs used coinbase as
their custodian this is a pattern that
is likely to repeat with
E the switching cost of moving capital
on chain is extremely low compared to
the switching cost of moving capital
from an ETF
sex um if staking which essentially
means if staking yield drops below a
certain point onchain Capital will leave
higher yields in in defi that's unlikely
to happen on an
exchange um in more sort of technical
language centralized custodians are
likely to have a a much lower supply
curve than decentralized
pools all this means that there's a real
possibility that staking ETFs combined
with issuance Cuts could think of this
as an accelerant uh leads to one
custodian controlling 51% of e staked a
few years down the
line uh if that happens you can probably
say goodbye to 's monetary
premium um and since this custodian has
a large if subtle influence over the
social layer it will be very difficult
if not impossible to Fork them out did
something go
wrong so before I come to some synthesis
right I've presented one thesis short
because I think uh there's like Casper
Ansgar Anders have done a good job of
presenting that well I've presented the
anti fees in a long way because I don't
think it's been presented before before
we come to a synthesis I want to do a
double click on how a strong LST adds
value to
ethereum the main I mean there are
multiple lenses through this but the one
I want to focus on is jurisdictional
dispersion so so almost 20% of light
owned operate owned operators are um
domiciled in APAC countries that's sort
of Hong Kong Singapore Australia South
Korea um and while Europe compromises
nearly 60% of the 60% of the total
two-thirds of these are actually non-e
right so this includes countries like
BVI Cayman Islands
Etc so 60% in total we have 60% non-eu
and non us nodes which is a pretty
resilient distribution especially
compared to an eum without
Lio if you look at sort of a
distribution of ethereum nodes you see a
real concentration in the US and Europe
especially the
EU um sort of according to eepa noes
like more than 66% of AUM nodes are
based in either the e or the EU so
that's significantly worse than Lio and
very prone to geopolitical uh
sensorship um I think if Li is doing
well but if it can get to five to 10%
representation from both laam and Africa
that would be perfect and I think we
should make that an
objective this is a picture from uh a
couple days ago from a Lio Community
staking Meetup these are kind of 11
leaders within the Lio Community stakers
from 11 different countries all running
their own
loads okay so how do we find a symphysis
here I think we have to start by by um
pushing back on the myopic focus of
solar stakers so I
mean um one way of looking at this is I
agree with Anders his point and his
point is um focusing on if solo stakers
might
solo uh might stop solo staking to a
higher degree than delegating stakers at
some specific yeld is more important
than if they change
modality yes so stakers are
indispensable and we need more of them
but the the overarching emphasis on this
I think is missing half the
story
and one way to reformulate this is we
need to if we care about using issuance
to improve geopolitical decentralization
of the underlying nodes we need to pay
just as much attention to who or not
onchain delegating stakers might stop
staking to a higher degree than those
holding their e on exchanges at some
specific yield I know that's a mouthful
um bear with me in other words the
answer we're looking for really balls
down to the shape of the respective
Supply Supply curves of different types
of operators in question again technical
jargon but I'm kind of addressing two
audiences here
[Music]
um this way of looking at things I think
was extremely well formulated by Barnaby
back in February so the sort of the way
he broke this down into the questions we
should be asking ourselves I think was
um was beautiful and and extremely on
point
[Music]
um having said that I don't think anyone
has quite answered uh these questions
and there are different groups working
on looking at the supply side but none
of them to my knowledge are actually um
specifically looking at answering the
way barab has framed this
problem and I think without this sort of
analysis we can't really be sure whether
or not um enforcing an equilibrium
according to uh you
know here I'm focusing on and as's
practical end game we can't really be
sure whether this will have a
significant negative impact on the
composition of the staking
set okay so what's a possible path
forward I have six minutes
um barring enough confidence on the
shape of the supply cast of different
types of operators one possible path
forward as I see it today is to build
off anders' latest practical endgame
proposal
which I think is actually
semi-reasonable um very well
articulated um very beautiful read if
anyone has a spare week to uh to get
through the post um but very
inspirational for me um in terms of
seeing how how his mind works and how he
thinks this is kind of how uh what he
proposes okay this is initial latest
proposal where you sort of you never
have a yearly issuance rate of more than
0.5%
um and there are sort of these different
curves that could satisfy this sort of
the three X's are on the bottom are I
think his his preferred curves and then
there's also like uh sort of a a a curve
ball um solution he outlines well okay
we could just cap it at 0.5% sort of
that flat Gray Line and revisit it in in
a few years time when we have more uh
insights on orbit ssf and and and and me
burn um and as you notice sort of they
Peak around sort of 20 30 million e
staked um and then they kind of smoothly
descend down and they do follow the
current reward curve up to uh you know
let's say 10 to 15 million e uh stake
but then they uh they diverge uh Peak
earlier and then come
down and right yeah um okay so I think
to find a synthesis we can work with
something that is mostly aligned with
this
um modulo the constraint we need to try
to depart minimally from the current
reward
curve and this additional constraint
comes from three
things um one improving the geopolitical
distribution of know should be a
property of
issuance two the macro risk of a
dominant coinbase is at least as
important as the macro risk of a
dominant
LST three we don't have a good read on
what the long-term supply curve looks
like even if we agree the supply curve
still has some room to shift downwards
from here
concretely I think this means finding a
mathematically elegant curve that one
departs minimally from the current
reward curve up until this point two has
a good chance of keeping total leave
State close to 50% so this kind of you
know again aligns um if we're going to
find consensus here I think one thing
that that uh is kind of axiomatic from
the other side is that there shouldn't
be another money that dominates uh uh
Eve um and so if you're trying to keep
keep if you're trying to adhere to that
you want to keep the total State close
to
50% and three does not increase uh
significantly increases chances of
calization so that means like doesn't
taper too steeply and that has to do
with kind of the validated Set uh you
know deciding to censor new deposits
because um you know as new people uh
come in uh their um uh rewards their
revenue as a whole goes down so um so
you don't want this to sort of go too
sleeply
this is kind of like a really uh
simplistic back of the envelope sketch
that has uh uh no mathematical
properties at all but it sort of kind of
gives you an idea of um this is the
brown line of kind of the design space
I'm I'm getting at here um although
there are mtic properties I think the
Brown Line sort of uh Peaks at 0.69%
issuance rate uh if so you know there
are ways of doing this that are not
violating the mtic properties of of of
an isurance rate upper
limit
okay another possible path uh simple
pragmatic um I think a way to Fred the
needle here is to add uh a fail safe to
the current curve so in other words to
choose a reward curve that sticks to the
current reward curve for longer until we
get close to 40 to 45% of each Stak say
before dropping down this can be either
aggressively in the spirit of sort of
Ansgar um or more smoothly in the spirit
of Anders um up for the bait the idea
behind this is it acts as a pragmatic
break on staked eeve surpassing 50% of
the eve Supply
um so with the current churn rate limit
realistically it will take another four
or five years for amount of e stake to
reach
50% so this weight and C approach would
allow us to gather more real world
information on what the equ equilibrium
is likely to be under the current curve
um more information on what the sort of
the long run Supply uh uh curve looks
like before making drastic changes which
are inevitably going to be based on um
less than complete information I think
the more time we have to sort of uh get
real M uh data on this the more
confident we can be to make the change
um
okay and sorry I didn't have time to
sketch that curve this morning um but it
basically just something that follows
the current worker for longer um then
sort of comes down uh at 45% stake in
terms of you know being uh a fail safe
to avoid worst case outcomes okay three
questions to think about I have 56
seconds one what are the set of reward
curves that could build off anders'
pragmatic endgame post while departing
minimally from the current reward curve
um two how steeply can the reward curve
fall without significantly increasing
the risk of calization attacks is this
something we need to be worried about
given that the social air can correct
for it um I don't know that's open
question three what are the set of
reward CES that could satisfy kind of
the simple SL pragmatic path uh what are
the downsides here again haven't you
know haven't really discussed this
deeply with the other side so we need to
sort of uh start a
conversation okay now I think you can
all throw tomatoes at me I'm pretty sure
everyone from the lighter side is
annoyed at me and everyone from the e
research side is annoyed at me but thank
you um
[Applause]
yeah can hear
me thank you Sasha um now the stage is
open for
questions I think we should start with
the first one do you agree the issue is
not in the curve but the fact we don't
have a way to increase incentives to
active participants solo stakers and
reduce passive
ones no I don't agree I mean I don't
disagree but I don't agree either it's
it's one
factor but why don't you agree well the
curve matters a lot but so there's um
you know if you could find a way to
increase incentives to active I mean
what do you even mean by passive
participants I guess whose question is
it who question is it maybe you want to
elaborate it a little bit more on your
question is the person still
here well if not then we just go to the
next one why do you think 50% of e
should be Stak it seems a very high
percentage so first of all I don't think
that 50% of e should or should not be
staked I'm just
trying these are kind of not necessarily
my personal thoughts this this
presentation that kind of trying to find
some sort of consensus I think like the
way you find some sort of consensus is
to say okay the most important factor
from one side is if should be the
dominant money the most important sort
of factor from the other side is hang on
we need to care about the geopolitical
diversity of nodes like how do you find
a synthesis um
50% avoids um having something else
dominate EA's money while still like
giving you the max maimum room to to to
uh decentralize the validated set
so that's
all next one is there a technical
solution to identify solo Stakes for
example someone onchain Z zkp and
preference them in issuance I'm not an
expert on on the latest there so I don't
know okay then we move on to the next
what do you think will actually happen
with the EF decision well it's not an EF
decision it's a community decision
that's why we were here otherwise we
wouldn't be here the decision would have
already been made and ethereum would
probably be worth zero um not because of
this decision being made but because of
the EF if the EF is a SLE decision maker
the etherum is worth nothing so I have
no idea um what will happen but it's not
the F's decision to make it's all it's
all of
us I think we still have more time um
should we also think of changing the
entry que to be closer and close to zero
instead of changing issuance
curve um I'm not sure I understand the
question sorry sorry with
um sorry oh stop letting in new valid I
think that's that's kind of dangerous
cuz you have like then you cement like a
an OG class of of people people that
just end up uh you know living off uh
yields forever and uh yeah I don't think
that's healthy for the system I think
you need it needs to be more
fluid I mean I think vitalic had an idea
if you were a cap right you could
randomly eject and randomly come in I
think that's interesting but I think you
do need some sort of fluid uh
movement um are there any more questions
questions from the audience which maybe
you have not found time to scan it and
place it online we still have more
time yeah the gentleman in the white
shirt has more
questions okay um the zkp question was
me the technology doesn't matter I guess
the question was like if one of the
goals is increase geopolitical
distribution um and or just like solo
stakers if you are able to positively
identify Solo stakers in a non Cil way
then you could design the protocol that
way so there are solutions I think to
this like choose your stack but there's
like some way to identify people so like
is that part of the conversation of you
know preferencing that goal by
identifying Sol sters I'm not sure if
necessarily identifying solers is part
of the conversation but like I think
part of the conversation is how
optimistic are we that we can bring in
new solar stakers right and this is kind
of like a a higher level than that but
it touches on it and I think like I
would say I'm like Lio as a whole is
very optimistic that we can bring in a
lot more solar stakers right and I think
like maybe and I don't want to speak for
um you know Casper or or or Anar but I
think like the the vibe I get is they're
actually much more pessimistic about
ability to bring in new solar stakers
right and so if you are more pessimistic
about enlarging this set of actors
um then you might be more prone towards
reducing issuance um than not but I mean
people can disagree on this
right thank you so much time is up